UK Households Downbeat About Finances

UK households have become more downbeat about their finances according to the latest survey in January by data company IHS Markit.

Worries about inflation and an increased reliance on borrowing have combined to create the downbeat view of consumers.

Official data released last week showed that 2017 was the weakest year for retail sales in Britain since 2013, as higher inflation curbed the spending power of UK consumers.

While the Bank of England expects the squeeze will ease in 2018 as inflation cools and weak wage growth ticks higher, Monday’s survey showed consumers – at least for now – lack this optimism and remain downbeat.

Official data published last week showed that inflation eased off a nearly six-year high in December when it edged down to 3.0 per cent. However, the survey showed that inflation expectations of consumers hit a 47-month high in January.

The survey also showed that households’ need for unsecured borrowing grew at the fastest pace in 11 months.

Sam Teague, economist at IHS Markit, said: ‘Pressures on UK household finances intensified at the fastest pace in four months, as rising living costs and subdued pay growth have led to a renewed squeeze on cash available to spend.’

Further official data has shown that consumer lending growth cooled in the second half of last year.

The survey also found that Forty-five per cent of households expected the Bank of England to raise interest rates within six months, down slightly from 48 per cent in December’s survey.

A Reuters poll of economists published last week reported that the Bank of England is likely to keep rates at 0.5 per cent until the fourth quarter of this year, having increased borrowing costs for the first time in over a decade in November.